Last week we got the beginning of the Market pull back that was anticipated and much needed. I stress beginning because we really don’t know how long or how deep the pullback may be. For all we know it is finished and we will continue upward. I doubt it. The SP500 is in no mans land as of Friday. No direction, finishing in the upper middle of a range of 1270 and 1300. With the 40 day moving average down at 1250.
The healthy thing for this market to do is keep selling off and marking some constructive, organized sell days down or sideways to the 1250 area or Sideways Time with the 40 DMA meeting the daily price action of the SP500. During the past few days the sell off has been organized and constructive with no particular sector selling in panic. Some of the markets Beta High Flyers like SalesForce, Riverbed, Level 5, Apple etc. have sold off. Sectors like the Transports and Banking also have had an orderly pulled back. Even precious metals have retreated. We have had a nice bull market in place since the end of November and this pullback should not be surprising.
What to do right now? Nothing except assemble your watch list and wait this out. Think of it like this. Do you want to be the first one out of your foxhole during a war. I don’t think so. Just sit in your foxhole, read the papers, sharpen you watch list and wait for a directional move. My plan is to wait about seven to 10 days and then reevaluate the market. My only holding currently is F (FORD) which declares earnings on the 28th. The F thesis is that this will trade sideways to up until Earnings with a strong stop loss at 17.35. If this changes at all I will be out. 17.35 is the point I am wrong and I want out.
So let’s use this time constructively and listen and learn where the market leading sectors maybe heading next. Make that watch list of stocks that you might want to own and start to determine the stocks level of possible support. Let’s watch the SP500 closely because this will be the leading indicator when it might be time to exit our fox holes and start taking long positions again. My watch list consists of JPM, MS, BAC, AAPL, UNP, LULU, ALTR, F, CAT
Be agnostic.
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